Brent Approaches $100 as US-Iran Tensions Reignite Hormuz Supply Concerns

Oil prices continued their upward move on Tuesday, with Brent nearing the $100/bbl mark as renewed US-Iran hostilities brought fresh concerns over potential disruptions through the Strait of Hormuz. Stronger Chinese crude purchases also supported the market, while traders awaited further details of a possible Iran-Oman agreement concerning shipping through the strategic waterway.

November Brent crude settled 72 cents higher at $97.00/bbl on Monday. There was no WTI settlement on NYMEX due to the US Labor Day holiday. By Tuesday, Brent had risen $2.00 to $99.00/bbl, up 2.1%, while October WTI increased $2.99 to $94.47/bbl, up 3.3%.

Renewed Fighting Raises Hormuz Concerns

The latest price gains followed renewed fighting between the US and Iran, ending a period of relative calm and increasing concerns over energy shipments through Hormuz.

Iran said an agreement with Oman on managing shipping through the strait was close and could include a temporary safe route. However, uncertainty remains over the US response, particularly following strikes on Iranian tankers over the weekend. Tehran has also warned vessels operating near Oman about potential risks.

Iran and Oman are seeking to formalize management of the strategic waterway, with the possibility of introducing transit fees in the future. The US has called for Hormuz to return to its pre-war status as a freely navigable route.

Oil Continues to Flow Despite Elevated Risks

Crude shipments are still moving through the Persian Gulf despite heightened security concerns. Vitol CEO Russell Hardy said at the Asia Pacific Petroleum Conference in Singapore that flows through Hormuz remain around 10 million bbl/day, with crude making up most of the volumes.

However, markets are increasingly pricing in the possibility of prolonged disruptions. Goldman Sachs analysts modestly raised their oil-price forecasts, expecting shipping disruptions could continue into 2027, while noting that the risks remain strongly tilted to the upside.

The rally has pushed Brent more than 30% above pre-war levels, before the US and Israel attacked Iran more than six months ago. Prices, however, remain well below the late-April peak above $126/bbl.

Stronger Chinese Buying Supports Prices

China's stronger crude purchases have added further support to the market. Chinese refiners have increased buying from Africa, Canada and Latin America, while imports from the Persian Gulf also edged higher in August, according to customs data.

The stronger buying has tightened several physical crude markets and supported prices, although it does not necessarily indicate a sustained recovery in underlying Chinese demand. Higher crude imports have also allowed China to increase refined-product exports, offering some relief to otherwise tight global fuel markets.

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